THE GUANO ERA

Consolidation of the State

The guano boom, made possible by the droppings from millions of birds
on the Chincha Islands, proved to be a veritable bonanza for Peru,
beginning in the 1840s. By the time that this natural resource had been
depleted three decades later, Peru had exported some 12 million tons of
the fertilizer to Europe and North America, where it stimulated the
commercial agricultural revolution. On the basis of a truly enormous
flow of revenue to the state (nearly US$500 million), Peru was presented
in the middle decades of the nineteenth century with a historic
opportunity for development. Why this did not materialize, but rather
became a classic case of boom-bust export dependence, has continued to
be the subject of intense discussion and debate. Most analysts, however,
concur with historian Magnus Mörner that "guano wealth was, on the
whole, a developmental opportunity missed."

On the positive side, guano-led economic growth--on average 9 percent
a year beginning in the 1840s--and burgeoning government coffers
provided the basis for the consolidation of the state. With adequate
revenues, Castilla was able to retire the internal and external debt and
place the government on a sound financial footing for the first time
since independence. That, in turn, shored up the country's credit rating
abroad (which, however, in time proved to be a double-edged sword in the
absence of fiscal restraint). It also enabled Castilla to abolish
vestiges of the colonial past--slavery in 1854 and the onerous native
tribute-- modernize the army, and centralize state power at the expense
of local caudillos.